You want to start an Coverdell Education Savings Account for your child.Suppose that you contribute $500 each year to this account for 18 years,starting when he or she is born.If you can earn 8% on the deposits,how much will be on deposit at the end of the 18th year?

Question

Quizplus · Accepted Answer

Using the formula for future value of an annuity:
FV = Pmt x ((1 + r)^n - 1) / r
where
Pmt = $500 (annual contribution)
r = 8% (annual interest rate)
n = 18 (number of years)

FV = 500 x ((1 + 0.08)^18 - 1) / 0.08
FV = $18,725.12

Therefore, the best choice is C, with the ending balance of $18,725.12.

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